{"id":4609,"date":"2021-09-09T13:15:44","date_gmt":"2021-09-09T02:45:44","guid":{"rendered":"https:\/\/strawman.com\/blog\/?p=4609"},"modified":"2021-09-09T13:15:44","modified_gmt":"2021-09-09T02:45:44","slug":"three-reasons-why-youre-underperforming-the-market","status":"publish","type":"post","link":"https:\/\/strawman.com\/blog\/three-reasons-why-youre-underperforming-the-market\/","title":{"rendered":"Three reasons why you\u2019re underperforming the market"},"content":{"rendered":"\n<p class=\"has-drop-cap\">The last year has been a wild one for stock market investors. Since the March 2020 lows, the ASX200 (ASX:XJO) is up an eye watering <strong>56%<\/strong>, the NASDAQ (ASX: NDQ) has gained <strong>71% <\/strong>and the S&amp;P500 (ASX:IVV) has marched <strong>54% <\/strong>higher. With astronomical gains from these indices, individual investors may have seen similar results. However, if you\u2019re not matching these market gains, there could be three main reasons why you\u2019re not seeing more green in your portfolio.\u00a0<\/p>\n\n\n\n<p><strong>Friction<\/strong><\/p>\n\n\n\n<p>Friction can really eat away into your profits. Consistently buying and selling in and out of stocks is an almost impossible way to generate long term wealth. The thing about trying to buy and sell at the right time is you have to actually be precisely correct &#8211;<strong><em> <\/em><\/strong>you have to not only pick the correct time to <em>sell, <\/em>but also pick the correct time to <em>buy. <\/em>This need for surgical precision and incessant trading is the enemy of the long-term investor. Warren Buffett once claimed his investing success was due to \u201clethargy bordering on sloth.\u201d\u00a0<\/p>\n\n\n\n<p>Not only is friction stopping the compounding of your stocks, it usually starts to rack up significant brokerage fees &#8211; the termites gnawing away at the foundations of your portfolio. $19.95 here, $9.95 there and all of a sudden your 22% gain has slowly evaporated and lined the pockets of your broker! Minimise friction by choosing great companies, sitting back and worrying less about the ebb and flow of market movements.\u00a0<\/p>\n\n\n\n<p><strong>Tax inefficiencies<\/strong><\/p>\n\n\n\n<p>Another reason you may be underperforming the market is that you are unable to capitalise on minimising your tax liability. Capital gains discount means that in Australia you can <em>pay half the tax on any potential gains if you hold the stock for over a year<\/em>. Let\u2019s compare two profits of $10,000 with the only difference being holding over a year or under a year.\u00a0<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter size-large\"><img fetchpriority=\"high\" decoding=\"async\" width=\"633\" height=\"177\" src=\"https:\/\/strawman.com\/blog\/wp-content\/uploads\/2021\/09\/table.png\" alt=\"\" class=\"wp-image-4610\" srcset=\"https:\/\/strawman.com\/blog\/wp-content\/uploads\/2021\/09\/table.png 633w, https:\/\/strawman.com\/blog\/wp-content\/uploads\/2021\/09\/table-300x84.png 300w, https:\/\/strawman.com\/blog\/wp-content\/uploads\/2021\/09\/table-45x13.png 45w\" sizes=\"(max-width: 633px) 100vw, 633px\" \/><\/figure><\/div>\n\n\n\n<p>Impatiently buying and selling of stocks is not only riskier and more difficult than buying and holding for the long term, but it means that you can miss out on discounting your gains by 50%.<\/p>\n\n\n\n<p><strong>Short-term mindset<\/strong><\/p>\n\n\n\n<p>Both of the previously mentioned pitfalls dovetail into one overarching hindrance to making compounding gains: <strong>a short-term mindset.<\/strong><\/p>\n\n\n\n<p>Having a long-term mindset doesn\u2019t just mean you don\u2019t have to worry about day-to-day price movements, it allows you to zoom out and take a macro approach to your investments. See how your thesis plays out over the course of months, but better yet, years.\u00a0<\/p>\n\n\n\n<p>Your thesis on renewable energy could prove fruitful, but if your time horizon is only a matter of days or weeks, how can you hope to be so correct so soon? Time will help to massage out bumps in the market, macro-economic funks and give a much truer indicator as to whether your investment is a compelling and lucrative one. Give it some time to run its course and you won\u2019t only benefit from compound gains, but also have a much more accurate portrayal of how the company is developing.<\/p>\n\n\n\n<p>Founder and CEO Tim O\u2019Reilly once said \u201cBeing too early is indistinguishable from being wrong.\u201d Give your investments time to grow, your thesis time to play out and yourself time to enjoy other things in life than day-to-day stock market movements.\u00a0<\/p>\n\n\n\n<p>If your stock picking isn\u2019t quite up to scratch with the market, it\u2019s worthwhile to consider these things before throwing in the towel and buying an index fund. Be patient, maximise your tax efficiency and focus on the long term &#8211; the opposite can be dangerous to your wealth!<br><\/p>\n\n\n\n<p class=\"has-text-color has-background has-normal-font-size has-very-dark-gray-color has-very-light-gray-background-color\"><em>Strawman is Australia\u2019s premier online investment club. <br>Members share research &amp; recommendations on ASX-listed stocks by managing Virtual Portfolios and building Company Reports. By ranking content according to performance and community endorsement, Strawman provides accountable and peer-reviewed investment insights. <\/em> <\/p>\n\n\n\n<div class=\"wp-block-button aligncenter\"><a class=\"wp-block-button__link has-text-color has-very-light-gray-color has-background has-tertiary-background-color\" href=\"https:\/\/strawman.com\/member\/landing\/signup\"> Create your FREE Strawman account<\/a><\/div>\n\n\n\n<hr class=\"wp-block-separator\"\/>\n\n\n\n<p class=\"has-text-color has-cyan-bluish-gray-color\"><em><strong>Disclaimer\u2013<\/strong> Strawman is not a broker and you cannot purchase shares through the platform. All trades on Strawman use play money and are intended only as a tool to gain experience and have fun. No content on Strawman should be considered an inducement to to buy or sell real world financial securities, and you should seek professional advice before making any investment decisions<\/em>.<\/p>\n\n\n\n<p class=\"has-text-color has-text-align-center has-cyan-bluish-gray-color\">\u00a9 2021 Strawman Pty Ltd. All rights reserved.<\/p>\n\n\n\n<p class=\"has-text-align-center\">| <a href=\"https:\/\/strawman.com\/member\/landing\/privacy\">Privacy Policy<\/a>&nbsp;|&nbsp;<a href=\"https:\/\/strawman.com\/member\/landing\/terms\">Terms of Service<\/a> | <\/p>\n\n\n\n<p class=\"has-text-color has-text-align-center has-cyan-bluish-gray-color\">ACN: 610 908 211 <\/p>\n","protected":false},"excerpt":{"rendered":"<p>The last year has been a wild one for stock market investors. Since the March 2020 lows, the ASX200 (ASX:XJO) is up an eye watering 56%, the NASDAQ (ASX: NDQ) has gained 71% and the S&amp;P500 (ASX:IVV) has marched 54% higher. With astronomical gains from these indices, individual investors may have seen similar results. However, if you\u2019re not matching these [&hellip;]<\/p>\n","protected":false},"author":7153,"featured_media":4611,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4609","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Three reasons why you\u2019re underperforming the market - Strawman Blog<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/strawman.com\/blog\/three-reasons-why-youre-underperforming-the-market\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Three reasons why you\u2019re underperforming the market - Strawman Blog\" \/>\n<meta property=\"og:description\" content=\"The last year has been a wild one for stock market investors. Since the March 2020 lows, the ASX200 (ASX:XJO) is up an eye watering 56%, the NASDAQ (ASX: NDQ) has gained 71% and the S&amp;P500 (ASX:IVV) has marched 54% higher. With astronomical gains from these indices, individual investors may have seen similar results. However, if you\u2019re not matching these [&hellip;]\" \/>\n<meta property=\"og:url\" content=\"https:\/\/strawman.com\/blog\/three-reasons-why-youre-underperforming-the-market\/\" \/>\n<meta property=\"og:site_name\" content=\"Strawman Blog\" \/>\n<meta property=\"article:published_time\" content=\"2021-09-09T02:45:44+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/strawman.com\/blog\/wp-content\/uploads\/2021\/09\/underperform.png\" \/>\n\t<meta property=\"og:image:width\" content=\"864\" \/>\n\t<meta property=\"og:image:height\" content=\"485\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/png\" \/>\n<meta name=\"author\" content=\"Samuel Turner\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Samuel Turner\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/strawman.com\\\/blog\\\/three-reasons-why-youre-underperforming-the-market\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/strawman.com\\\/blog\\\/three-reasons-why-youre-underperforming-the-market\\\/\"},\"author\":{\"name\":\"Samuel Turner\",\"@id\":\"https:\\\/\\\/strawman.com\\\/blog\\\/#\\\/schema\\\/person\\\/2bb2f73104fb265a971a399075e6b4ac\"},\"headline\":\"Three reasons why you\u2019re underperforming the market\",\"datePublished\":\"2021-09-09T02:45:44+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/strawman.com\\\/blog\\\/three-reasons-why-youre-underperforming-the-market\\\/\"},\"wordCount\":726,\"image\":{\"@id\":\"https:\\\/\\\/strawman.com\\\/blog\\\/three-reasons-why-youre-underperforming-the-market\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/strawman.com\\\/blog\\\/wp-content\\\/uploads\\\/2021\\\/09\\\/underperform.png\",\"articleSection\":[\"General\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/strawman.com\\\/blog\\\/three-reasons-why-youre-underperforming-the-market\\\/\",\"url\":\"https:\\\/\\\/strawman.com\\\/blog\\\/three-reasons-why-youre-underperforming-the-market\\\/\",\"name\":\"Three reasons why you\u2019re underperforming the market - 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